While I was eager to delve into Ellen Schultz’s Retirement Heist, I was unprepared for how outraged I would become reading the introduction alone. Schultz’s writing is straightforward and easy to comprehend. That is not the issue. Rather, the issue is how convincingly she makes the case that the “real retirement crisis” is that companies were permitted to slash benefits to boost profits, lay off older workers before their retirement benefits would fully kick in, and partner with pension industry consultants, regulatory boards, and even members of Congress to pilfer previously earned benefits away from workers in order to improve balance sheets and provide even greater compensation to top executives. With solid evidence based on filings from the Securities and Exchange Commission (SEC) and the Internal Revenue Service (IRS), as well as original analyses of company data and memos, award-winning author Ellen Schultz clearly documents the history behind and reasons for the current retirement crisis so many American workers face today.

In 1981, when President Reagan took office, 40% of all U.S. retirees received dependable pensions called defined benefit pensions. Defined benefit plans pay retirees a negotiated amount of money each month. By 2011 fewer than twenty percent (20%) of new retirees were able to rely on defined benefit pensions. Equally troubling is that just two decades ago corporate pension plans were generally well funded due to rules that required employers to adequately fund their plans and laws that made it harder for companies to raid the plans for other uses. After the long-running bull market soared in the 1990s, pension plans were so well funded that the companies could have fully paid their current and future retirees’ pensions even if those retirees lived to 99 years of age, and with no additional future company contributions.

Retirement Heist includes 12 chapters. Each chapter focuses on an important cause for the pension debacle. Chapter 1, aptly titled “Siphon: How Companies Plunder the Pension Piggy Banks,” opens with a November 1999 meeting of national pension experts at the Labor Department in Washington, D.C. They were there to discuss a $250 billion problem. The problem was not a shortage of pension plan dollars, as there were more than a quarter trillion dollars in excess total assets. What might be thought of as surplus pension assets are actually needed by pension plans during bear markets, as well as to provide benefits for an increasingly aging workforce. Instead of advocating for that, employers complained that pension assets were locked up and asserted that pension funds should be diverted to pay for retiree health benefits and enhanced benefits to an exclusive subclass of current participants (i.e. top executives).

Schultz shows us the dance that employers and consultants successfully performed with the ERISA Advisory Council to recommend that government withdrawal rules be loosened up.

Throughout the book Schultz includes numerous heart-wrenching stories about retirees who were simply in the way of their company’s greedy pursuit of even greater profits. Consequently, these retirees had their pension and healthcare benefits unilaterally reduced or cut altogether. One such story has an ICSOM connection. A retiree spent more than five years pursuing vested pension benefits he earned as the company fought him every step of the way. What began as a single complaint grew into a class-action lawsuit that eventually cost the company over $11 million in adjusted pension benefits to more than a thousand retirees who had been wrongfully shortchanged. The lawyer that took on that Fortune 500 company and won was our current ICSOM counsel, Susan Martin.

Attention in the book is given to the increased reliance on 401(k) and 403(b) plans as employers both in the for-profit and not-for-profits sectors abandon traditional pension plans. 410(k) and 403(b) plans are defined contribution plans that effectively shift the burden of providing adequate pension benefits from the employer to the worker. They have already proven to be a failure when compared to traditional defined benefit plans. Workers save too little, too late, and are all too often tormented by market fluctuations and extreme volatility that cause many to pull out their money at precisely the wrong time. As a result they buy high and sell low, effectively ensuring that they underperform the market and endanger their retirement savings.

Poor performance along with excessive fees found in many 401(k) plans is painful enough. Schultz adds, “Employers have used pension rules to shut millions of low paid employees out of their (401k) plans and to provide them with less generous benefits, while creating additional restrictions that make these plans more valuable to managers and executives, at the expense of everyone else.”

Tactics employed by companies to take away pension and healthcare benefits from workers and retirees are now being used by government officials and not-for-profit boards and managers. For example, the Philadelphia Orchestra Association successfully reneged on retirement promises to their current and retired musicians by utilizing Chapter 11 bankruptcy while shielding endowment assets in excess of $140,000,000.

Retirement Heist is a “Call to Action” that should be taken seriously by every American worker, including professional musicians — particularly in an election year where hard-fought gains by unions such as minimum wage standards, employee rights, and defined benefit plans are under vicious attack.

About the Author

Ellen E. Schultz is an investigative reporter for The Wall Street Journal who has covered the so-called retirement crisis for more than a decade. Her reporting has led to Congressional hearings, proposed legislation, and investigations by the Treasury and the Government Accounting Office.

Ms. Schultz has won dozens of journalism awards for economics, financial, and investigative reporting, including three Polk Awards, two Loeb awards, and a National Press Club award. In 2003, Schultz was part of a team of Wall Street Journal reports awarded the Pulitzer Prize, for articles on corporate scandals. She lives in New York City.

Ms. Schultz is scheduled to be a featured presenter at ICSOM’s 50th-anniversary 2012 Conference in Chicago.